Pre Budget Report

The Chancellor gave his Pre Budget Report on 9th December. The main announcements were as follows:

• the personal tax allowance and the threshold at which 40% tax is charged will remain unchanged for 2010/11.
• the increase in the small companies’ rate of corporation tax to 22% will be deferred for another year until 1 April 2011.
• NIC rates will rise by a further 0.5% from April 2011 for employers, employees, and the self-employed.
• the basic state pension will be increased by 2.5% in April 2010. Certain other benefits and tax credits will rise by 1.5%.
• there will be a temporary bank payroll tax of 50% where banks, building societies and certain other financial business provide a bonus of over £25,000 to an employee. This will apply from 9 December 2009. On 18th December, HMRC issued a statement restricting the extent of the tax “to ensure that the definition of ‘bank’ and ‘banking group’ applies as originally intended’.
• draft rules for limiting higher rate pension contributions tax relief from April 2011 have been published. There are several important changes, including a cut in the income threshold to £130,000.
• the rules that currently limit pension contributions tax relief (‘anti-forestalling’) have been changed with immediate effect; the revisions include a new income threshold of £130,000.
• taxpayers who open offshore bank accounts in certain jurisdictions will be required to report to HMRC. Various anti-avoidance measures have been implemented with immediate effect.